A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

June 25, 2007

Smithsonian board missing in action

Sleepwalking through a screw-up of massive proportions, the board of the Smithsonian Institution unintentionally has sent a wakeup call to nonprofit boards everywhere.

A small but growing number of nonprofits have taken a lot of heat in recent years, and rightly so, because of bad behavior.

But just as parents are responsible for their children, nonprofit boards are accountable for their organizations.

When organizations run amok, as the Smithsonian has done over the past year, it often is because their boards are asleep at the wheel, or sticking their heads in the sand, or both.

According to a new report by an independent committee, the board of regents at the Smithsonian let Lawrence Small, its former chief executive, spend lavishly on personal expenses and ignore the board on decision-making.

Smitten by his fundraising skill, the board also awarded Small a salary and other compensation that grew to $915,000 in 2007 from $536,000 in 2000, even though private donations to the Smithsonian actually fell.

From 2000 to 2006, as the New York Times reports, Small also took nearly 70 weeks of vacation and spent 64 business days serving on corporate boards that paid him a total of $5.7million.

If their boards do not start taking responsibility and getting their houses in order, nonprofits everywhere will face a serious backlash in the form of a crackdown by regulators and rejection by donors.

In its failure to take charge and rein in its chief executive, the Smithsonian board has provided a painful lesson for all nonprofits.

Unless they start acting as responsible stewards of the resources invested in advancing their mission, boards everywhere run the risk of losing control of their organizations, triggering a crackdown by regulators, and turning off their donors.